Question
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $202,500. Project 2 requires an initial investment of $138,000.
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $202,500. Project 2 requires an initial investment of $138,000.
| Annual Amounts | Project 1 | Project 2 |
|---|---|---|
| Sales of new product | $ 136,000 | $ 116,000 |
| Expenses | ||
| Materials, labor, and overhead (except depreciation) | 74,000 | 41,000 |
| DepreciationMachinery | 29,000 | 27,000 |
| Selling, general, and administrative expenses | 17,000 | 29,000 |
| Income | $ 16,000 | $ 19,000 |
(a) Compute each project's annual net cash flow.
(b) Compute payback period for each investment.
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Management And Cost Accounting
Authors: Alnoor Bhimani, Srikant M. Datar, Charles T. Horngren, Madhav V. Rajan
7th Edition
1292232668, 978-1292232669
